Monday, March 04, 2013 6:01 am

Economists were opposed to automatic spending cuts

The Associated Press

Most business economists opposed the automatic spending cuts that took effect Friday night amid the gridlock between President Obama and Congress, but they overwhelmingly support efforts to reduce the deficit over the next 10 years, according to a survey released Monday.

The survey of 196 members of the National Association for Business Economics, taken from Jan. 21 to Feb. 13, gave some support to both sides in the U.S. government budget debate.

Republicans' views won some support, as 56 percent of the economists said deficit reduction should be achieved "only" or "mostly" with spending cuts. More than half, or 58 percent, said the cuts should be focused on entitlement programs, such as Social Security and Medicare.

President Obama also got some backing, as most of the surveyed economists said that spending cuts should be balanced by raising revenue through tax increases. Around 95 percent said that Congress should reform the individual tax code, with 74 percent believing the reforms should "slightly" or "significantly" increase revenues.

The economists were increasingly concerned that fiscal and monetary policy were too stimulative to the economy, which means they are worried that economy-boosting government spending and low-interest rates could eventually result in damaging high inflation or an asset bubble.

On fiscal policy, only 35 percent felt the government's fiscal policy was "too restrictive," down from 43 percent in September, perhaps reflecting the improving economy since then, the NABE said.

The percentage who felt that monetary policy was "too stimulative" rose to 44 percent in the latest survey, up from 26 percent in September.

About 53 percent said that the monetary course Federal Reserve Chairman Ben Bernanke has charted is "about right." That's down from 60 percent in the September survey.

The third round of quantitative easing, known as QE3, decided upon by the Federal Reserve in December, may have contributed to the view that its policy was too stimulative, the NABE said.

Among other issues, more economists now believe the Obama administration should approve the construction of the Keystone XL pipeline, which would transport oil from Canada to refineries on the Gulf Coast of the U.S. The percentage supporting such a plan grew to 78 percent in the latest poll, up from 69 percent previously.

About 52 percent believed that national regulations over a type of gas drilling known as hydraulic fracturing, or "fracking," should be enacted, while 51 percent said the government should continue to subsidize the development of alternative energy sources such as wind and solar power.

The economists also had a better view of the troubles facing the euro zone, with 76 percent saying all 17 members of the European Monetary Union will still be members a year from now, compared to 47 percent who said so in the September survey.